June 27, 2014 / 12:37 PM / 3 years ago

UPDATE 1-Canada factory and raw material prices fall in May

(Adds sectoral breakdown, effect of stronger Canadian dollar)

* Industrial product prices -0.5 pct on month, +3.4 pct on year

* Raw materials prices -0.4 pct on month, +7.6 pct on year

* Forecast: industrials no change on month; raw materials -0.1 pct

* Cheaper energy, stronger C$ major causes for factory price fall

OTTAWA, June 27 (Reuters) - Canadian industrial product prices unexpectedly fell in May, due largely to cheaper energy and a stronger currency, while prices for raw materials fell by more than predicted in May, principally because of cheaper animals.

Statistics Canada reported on Friday that factory prices were 0.5 percent lower in May than in April, after a 0.2 percent drop in April. They were 3.4 percent higher from May 2013. The raw materials price index fell 0.4 percent on the month, the first decline since November, but rose 7.6 percent on the year.

The median forecasts in a Reuters survey of economists was for no change in product prices from the month before, and a 3.8 percent increase on the year; and a 0.1 percent monthly fall in raw materials prices and a 7.5 percent rise on the year.

Within the industrial price index, energy and petroleum products dropped 1.3 percent, while vehicles were down 0.6 percent, largely due to the increase in the Canadian dollar. Some exporters report their prices in U.S. dollars, leading to lower Canadian dollar prices when the Canadian currency rises.

“Without the measurable effect of the exchange rate, the index would have fallen 0.3 percent instead of 0.5 percent,” Statistics Canada said.

Within raw materials, live animal and rubber prices fell during the month but prices for crops, metal and crude oil rose.

Reporting by Randall Palmer; Editing by Bernadette Baum

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